Thursday, February 19, 2009

Time to unload

I am selling into today's strength. With the garbage stimulus plan and employment falling off a cliff. We are not at bottom yet. There is not much the Obama stimulus plan can do to turn the tide at the moment. Further, states are having budget problems, Eastern Europe is having credit problems (which will drag Western Europe down). Everyone needs money all of a sudden and only a few will be able to borrow. Some entities will be forced to raise bond rates to attract buyers (Spain) and this will further push and damage the already suffering economy.

I am selling into the strength BIDU, GOOG, RIMM, TBT. But keeping my FXI, VT and AET.un

Tuesday, February 10, 2009

Time to cover some shorts

I am covering a bunch of shorts today after this Tim Geithner speech. As bad as I think he is as the new Treasury secretary, the markets are showing signs of a temporary bottom. As a trader, we can never fight the market despite longer term beliefs. Large instirutions are starting to pick at stocks so its time to ride this wave for a bit. I covered most GBP and EUR shorts and long FXI, BIDU, CTRP, TBT, VT, AET.UN. I also feel oil is bottoming so this is time to start loading up on Canadian oil trusts that have great management and already reduced their dividends substantially such at Arc Energy.

Monday, February 02, 2009

We enjoyed the boom cycle, now deal with the bust cycle

Why are some things so simple, repeated again and again on TV. It is actually beginning to annoy me. Two of the most talked about topics on Bloomberg:

1) Banks are not lending even though they took in the TARP money from the government. And instead of lending, they are using the capital to shore up their balance sheets or make mergers and acquisitions.

The simple truth:
Of course they are! Banks are businesses out to make money, not provide social security. They lend you an umbrella when it is sunny. Not when it is raining. And certainly not when they need the umbrella themselves!

Business is bad and this economic tsunami is big. The bankers certainly know it. They are not going to lend if they know businesses are going to go 'out of' business 6 months from now. They know things are not going to get better no matter what the politicians say. TARP money or no TARP money. Get used to it. And all these portfolio managers and talking heads need to shut up about things getting better in the second half of 2009. This financial trouble we are in right now is so big that it is going to take at least 5 to 10 years to get through. They of course have an agenda to say it will get better soon because they want you to invest money into the markets not withdraw from it! 

As for the banks using the TARP money to shore up balance sheets and make acquisitions. Of course they are going to do it. They are here to make money. Lending it to soon-to-be-bankrupt small businesses will lose them money. But scooping up distressed competitors will make them money.

2) Bailouts, stimulus package and more bailouts!

The simple truth:
Out economies are contracting from a level that was simply an inflated bubble. We were living in a world fueled by debt. Money borrowed from the future. Make no mistake about it. Whatever comforts, increasing standards of living and entitlement one may feel especially was created from debt. This is especially true for most Western and developed economies. There has been little real value created with the ever expanding service industry.

Now is the time to pay the price as this bubble has popped and will continue to deflate. All this rubbish talk from politicians around the world talking about 'fixing' the problem with more debt is ludicrous. First of all, excessive debt is what got us here in the first place. Second of all, this bust cycle we are in now is so big, that nothing these politicians do now can stop the tide in the short term. The only way is to suffer the pain in this bust cycle the same way we all enjoyed the boom cycle. Let companies fail. Deal with the layoffs, high jobless rates and home foreclosures. Values will decrease and then money will come back into the markets naturally when the prices have reached the right level. Things have been overpriced, too high and for too long. Now prices must come down for our economies to truly be healthy again and resume on an upward trajectory. Home prices, wages, standards of living have all been inflated and overshot to the upside. Now they must come down as part of a natural cycle.

Unfortunately politicians need votes in the short term. So they want short term solutions and push the real solution away which is short term pain for long term gain.

And as people, we have become accustomed to expect only good times. We feel entitled to a good life and ever increasing standards of living.

And this is the world that we live. And this will continue to prevent us from accepting the reality of the situation required to take on real solutions. So let’s just continue to talk about it on Bloomberg and maybe a miracle will happen. We'll wake up and this was all just a bad dream.